Issue No. 275: YouTube goes commerce

Pictured: YouTube sensation “Lucas the Spider”

YouTube creators have been frustrated with the platform’s ad operations, as of late. YouTube legend and videographer Casey Niestat has nearly 10 million YouTube subscribers, the embattled Pewdiepie has 64 million, the famed MKBHD has 6.5 million, and Logan Paul has nearly 18 million (and an eight figure online store). In addition to the proceeds driven by advertising to an audience of those respective magnitudes, creators have been increasingly reliant upon merchandising for a steady stream of revenue. In a flash, a YouTube creator showed the world just how powerful an online retail operation can be for creators.

Joshua Slice is a former Disney employee and, currently, the creator and animator of the Lucas the Spider YouTube phenomenon. With a relatively smaller community of 2.4 million YouTube subscribers, the first 18 days of his embedded store achieved an astounding open. The creator of Lucas the Spider, launched a Kickstarter-esque campaign on Teespring (in addition to a full store). The plushie product sold around 60,000 units, netting Joshua $1 million in profit in just 18 days. This 60,000 unit tally was one of twenty available SKUs.

We believe that Patreon’s acquisition of Kit signals a potential uptick in M&A and partnership activity throughout the creator space. Kickstarter acquired Drip in March of 2016 and will likely pursue a merchandising solution for its stable of creators to mirror Patreon. YouTube is positioning its platform to compete with Patreon, Instagram, and Shopify, as well.

According to Tech Crunch’s June 5, 2018 article:

The deal also could help Patreon stay ahead of YouTube and Facebook, which are encroaching on its subscription patronage model. Patreon now has 2 million patrons backing 100,000 creators. It paid out $350 million over its first five years through 2017, and expects to send creators another $300 million in 2018, while taking a 5 percent cut.

Twenty days later and revisiting the Member Brief seems a bit prescient. With the newly announced partnership between YouTube and Teespring, Patreon’s most recent move is already behind the curve. The acquisition of Kit didn’t move Patreon any closer to shipping merchandise for its over 100,000 partners.

Patreon is well-positioned to be the leader in one-stop-shops of monetization for content creators. Kit can be a transformative partner for them, intensifying YouTube and other creator networks’ need to bolster their revenue operations. Commerce will become an increasingly important platform tool in a race to stay competitive for top creators. Activity over the next six to twelve months will determine which creator networks seek out the services of the aforementioned merchandising logistics companies: through partnership, by way of a joint venture, or through an out-right acquisition.

Prior to this eCommerce rollout, YouTube recently launched the same type of membership service that Patreon offers its creators. What does this mean for creator-based platforms? Patreon’s M&A signaled a period of consolidation and will continue to lead to the siloing of services for top creators. According to Byron Jones of the Music Network, “During the tests, Teespring reported an 82% success rate for YouTube users and an average 25% rise in item sales for each.”

The initial numbers are gaudy and Teespring’s PR has been persistent. Their recent success has sent ripples across the industry. And to be fair, it was an enormous win for them because newer YouTube creators will now be incentivized to remain loyal to YouTube’s offerings. It’s more than likely that some of YouTube’s creators will consider shifting from other storefronts to YouTube’s Teespring offering. It’s even possible that creators like Logan Paul (who has a sophisticated eCommerce operation in place) will consider testing inline retail on their YouTube channels.

But this partnership is clearly a shot across the bow for Instagram and Patreon. While Instagram is all-in on Shopify’s seamless integration and growing into YouTube’s space, Patreon is still in need of a merchandising partner and an exclusive creative partner that can help them in the short term. Consolidation will continue.